HomeArticlesOverview Of The Small Island State Mauritius Economics Essay

Overview Of The Small Island State Mauritius Economics Essay

Foreign Direct Investment ( FDI ) has been playing a cardinal function in developed, developing every bit good as in passage economic systems. It has been a cardinal driver of economic growing and development and FDI attractive force remains a top precedence for about all authoritiess. FDI which has been driven by the intensified chase of world-wide production, sourcing and selling schemes by transnational corporations, constitute a possible big beginning of funding for future development demands. The inquiry of whether FDI creates positive public assistance effects for the host states has been capable of great argument although most bookmans consider that FDI tends to be favorable as it may bring forth spillovers effects in footings of engineering transportation, export every bit good as higher productiveness for the remainder of the economic system.

Over the past two decennaries, most developing states have moved off from province driven and inside focused towards a free market oriented development scheme ( Kobrin 2005 ) . This displacement in policy place has seen greater accent being placed on pulling FDI because it was anticipated that such influxs would assist to relieve the fiscal, technological and skill shortages that existed in many of these states ( Balasubramanyam et al. 2001 ) . Consequently policies

designed to entice in FDI have proliferated and Mauritius is no exclusion.

Overview of the Small Island State: Mauritius

The determiners of FDI could non be explained without researching the history and economic transmutation of the state. Mauritius is a little island province in the south-west Indian Ocean about 800 kilometers E of Madagascar. Mauritius got its independency since 1968 and became a Republic in 1992. In malice of several restraints be it in the signifier of low gift of natural resources, a little domestic market, farness from major markets and exposure to cyclones and exogenic dazes, Mauritius has one of the highest per capita GDP in Africa. Real GDP growing averaged more than 5 per centum between 1970 and 2011. The Republic of Mauritius is a democratic and successful state whose full population ( 1.3 Million as at June 2012 ) has hereditary beginnings elsewhere viz. from Europe, Africa, India, and China. The orientation of Mauritius towards other states is influenced by its location, resources, colonial yesteryear ( Gallic

followed by British ) , domestic political relations and economic jussive moods. Mauritius has peculiarly strong dealingss with France, Britain, India, and since 1990 with South Africa.

The British captured the island in 1810 and gave up sovereignty when Mauritius became independent in 1968. Mauritius enjoys warm political dealingss and of import economic ties with Britain and receives important development and proficient aid.

France, another former colonial power ( 1767-1810 ) , provides Mauritius with its largest beginning of fiscal assistance and in add-on to merchandise, in which France has traditionally been Mauritius ‘s largest provider every bit good as its largest or 2nd largest client, peculiarly of fabrics. France provides Mauritius with legion sorts of aid.

India, which has deep societal and historical links with a big part of the population of Mauritius, is the state ‘s 2nd largest beginning of foreign aid. India has devoted a big portion of assistance to cultural ventures. Apart from traditional cultural and trade dealingss of Mauritius with India, the two states have engaged in legion joint ventures, peculiarly in the fabrics country and have signed cooperation understandings in assorted domains.

Mauritius has limited but turning trade dealingss with the industrialising states of Asia, peculiarly Hong Kong and Japan. It besides has close dealingss with China.

Mauritius is a Member of UN and Commonwealth and has received aid from the World Bank, the IMF, and the European Development Bank.

FDI Flows

Harmonizing to the figures from the World Investment Report 2012, the Global FDI flows rose reasonably to $ 1.5 trillion in 2011 ( 2010 ; $ 1.24 trillion ) , beyond the pre-crisis norm sum yet still below their 2007 extremum by some 23 % . All major economic groupings experienced an addition in FDI influxs in 2011. In developed states, FDI increased by 21 % to $ 748 billion while in developing states, FDI reached a record $ 684 billion stand foring an 11 % addition over last twelvemonth. FDI in the passage economic systems reached $ 92 billion matching to an addition of 25 % over last twelvemonth. Like last twelvemonth, developing and transitional economic systems together attracted more than half of the planetary FDI flows. With respect to Mauritius, it experienced a diminution in FDI by about 37 % , to make $ 273 million in 2011, from an earlier record extremum FDI of $ 430 million in 2010.

There has been a dramatic addition in FDI influxs in Mauritius over the past 4 decennaries leaping from a simply Rs 9 Million in 1970 to Rs 9.5 Billion in 2011. Although aa‚¬A“foreign direct investing has played a little but polar function in Mauritiusaa‚¬A? ( UNCTAD 2001 ) , FDI continued to stay a major and dependable beginning of investing support for the state. Mauritius has besides been able to defy to a certain extent the external daze emanating from the recent Euro Crisis due to the resiliency of the flow of FDI which has proved to be the private capital flow of pick. It is for this really ground that the Mauritanian authorities is keeping its focal point on bettering the making concern clime and go on to supply clear and crystalline guidelines for foreign investors. The UNCTAD FDI Attraction Index 2011 ( UNCTAD 2012 ) which ranks states by the FDI they receive in absolute footings and relation to their economic size, topographic points Mauritius in the class of states which are “ in line with outlooks ” . The Report besides mentions that both in footings of FDI influxs and escapes, Mauritius is in the top 5 “ Small Island Developing States ” ( SIDS ) class which regroups 29 states. Mauritius has registered the 2nd largest greenfield investing undertaking in 2011 in its group.

It is deserving observing that the distribution form of FDI in Mauritius has been asymmetrical over the past 40 old ages. FDI influxs have remained systematically low and undistinguished in quantitative footings over the decennaries of 70s and 80s. Annual FDI influxs averaged Rs 18 Million during the period 1970-1979, Rs 141 Million during 1980-1989 and Rs 545 Million in 1990-1999. However, during the period 2000 to 2011 and particularly since 2006, Government has attracted

more FDI than the old 40 old ages. FDI inflows to Mauritius rose well to make an norm of Rs 6.5 Billion chiefly explained by the investing of France Telecom into Mauritius Telecom in the telecommunication sector. This peculiar investing has been through direct sell-off of portions. During the same period, there has been a major policy displacement whereby the authorities introduced an Integrated Resort Scheme ( IRS ) and a Real Estate Scheme ( RES ) with the passage of the Business Facilitation ( Miscellaneous Provisions ) Act 2006 which enable certain class of aliens to get private belongings and at the same clip obtain their resident license. This new coevals of investing policies will be pursued by the Government while edifice and keeping a by and large favorable investing clime.

In 2011, the degree of Foreign Direct Investment received sums to an estimated Rs 9.5 billion, stand foring a 30 % diminution from the 2010 figure of Rs 13.9 billion. As has been the tendency during the past few old ages, the Construction and Real Estate sectors attracted the lionaa‚¬a„?s portion, stand foring about 70 % of entire FDI received out of which foreign investing in the Integrated Resort Scheme, Real Estate Scheme and the Invest Hotel Scheme aggregated to Rs 3.3 billion in 2011. The Financial Services sector is the merely other sector with the highest FDI recorded, at Rs 1.6 billion. The majority of entire FDI came from Europe ( Rs 5.7 billion ) and South Africa ( Rs 2.2 billion ) . France was the leader among European states, with Rs 3.3 billion invested in Mauritius, followed by UK with Rs 1.8 billion. FDI from India and China was less than Rs 100 million.

On the other manus, Mauritanian business communities invested abroad to the melody of Rs 2.5 billion in 2011. This is much lower than the Rs 4 billion invested abroad in 2010. Investing abroad was chiefly in agribusiness, fabrication, cordial reception and fiscal sectors. Outward investing targeted chiefly Africa and India.

Research Questions

The chief aim of this paper would be to measure the cardinal determiners of FDI in Mauritius during the period 1976 to 2011. The primary research inquiry seeks to happen out what factors motivate, attract and sustain FDI in Mauritius. The survey will besides analyze which sector ( s ) has/have been the chief subscriber ( s ) to FDI in Mauritius. The survey would farther place strategies, policies mechanism put in topographic point during the period of the survey which impacted on FDI. The findings will assist to invent ways of keeping such FDI degrees every bit good as work towards increasing such influxs. Furthermore, it will assist the authorities to explicate the right policy prescriptions in pulling FDI and farther guarantee that such financess are being channelled to productive investing with the ultimate purpose of accomplishing economic growing and prosperity.

Aim of the Study

This survey would try to supplement the related literature and analyze the function of policy alterations over the last decennaries which can explicate the grounds for significant FDI influxs in that period. To that consequence, FDI inflows in Mauritius, a little island province, will be analysed to confirm the relevancy of the major FDI determiners theories and statements highlighted in those surveies. Mauritius remains a authoritative illustration of leveraging FDI in the post-globalisation epoch irrespective of its little domestic market, limited supply capacity and remote geographic location. The state has repeatedly ranked among the most successful states for international concerns and within the first 25 states for easiness of making concern environment as classified by the World Bank. Policy experts and trade analysts ascribe the success of Mauritius to the economic reform procedure which was initiated in twelvemonth 2006. Ultimately the chief aim of the survey is to research on the most of import determiners of FDI in Mauritius during the period 1976 to 2011.

Outline of the Study

The present chapter introduces the background and foreground the chief aim of the survey. Chapter 2, trades with the literature reappraisal, including assorted theories explicating FDI and empirical consequences which relate to the research inquiries. Chapter 3 explains in inside informations the informations and methods used and their principle for choosing them. The empirical findings are demonstrated in chapter 4 and same will be analysed against the background of the old research covered in the literature reappraisal. The last chapter covers the treatment and decision subdivision which would include the recommendations, restrictions, waies for future research every bit good as an analysis and rating of the research procedure.